Wendenhof is Corporate Director of Industrial Relations for

REALIZING A CORPORATE PHILOSOPHYManagement scholars and practicing managers have long viewed organizations asmanifestations of the underlying values of their founders, managers, or members. Many also haveargued that corporate values are related to organizational success, and that an important task ofexecutives is to express and help realize these values in everyday organizational life. Decadesago, for example, sociologist Philip Selznick argued that a mere organization becomes an enduringinstitution when it becomes infused with values that go beyond efficient performance. Hesuggested that value-laden institutions gain advantages over other organizations, includingemployee loyalty, adaptability to a changing environment, and enhanced prospects for survival.Selznick indicated that the most important roles of leaders are to determine key organizationalvalues and to embody them in the organization's structure.Some companies have attempted to express and reinforce their values by stating thempublicly. Companies such as IBM, Johnson & Johnson, and Hewlett Packard have promoted aspecific statement of values for decades. Such statements have become so prevalent that six out often large U.S. firms have one.The statement of values might be termed a corporate philosophy, credo, vision, aspirations,mission, or principles. Some of these terms are more likely to be used in certain contexts thanothers. For example, those writing from an organizational culture perspective are more likely touse the term “philosophy,” while strategists are more likely to think in terms of a “mission.” Incorporate practice, however, these terms are used almost interchangeably. In this article we willspeak of corporate philosophy, but draw from literatures that use related terms as well.We first consider why corporate philosophy statements have emerged as a commonmanagement practice. We take the position that corporate philosophy statements can be beneficial,but that most do not have any evident positive effects because of flaws in the statements or in theways they are used. Next, we explore why it is possible for a firm to derive benefits fromadopting a philosophy statement. We then turn to the issue of what corporations can do to developand implement a corporate philosophy in ways that might result in benefits to the organization.2

Finally, we examine the experience of Eaton Corporation, a company that is attempting to turn theideals expressed in its philosophy into everyday reality.The Corporate Philosophy StatementThe Emergence of the Corporate Philosophy StatementThe corporate philosophy statement did not become a popular expression of corporatevalues until the early 1980s. The turning point was two bestsellers, Peters and Waterman's InSearch of Excellence and Ouchi's Theory Z. Peters and Waterman indicated:"Every excellent company we studied is clear on what it stands for, and takes theprocess of value shaping seriously. In fact, we wonder whether it is possible to bean excellent company without clarity on values and without having the right sorts ofvalues. . . . Clarifying the value system and breathing life into it are the greatestcontributions a leader can make."Ouchi viewed an explicit corporate philosophy as a key attribute of a clan-like "Theory Z"organization. He devoted a chapter to corporate philosophies and included the text of severalexemplars in an appendix. Ouchi argued that a philosophy is critical because it enables employeesto coordinate their activities for common purposes even in the absence of hierarchical direction.These books heralded a tremendous increase in interest among both practitioners andresearchers in the broad topic of organizational culture. Culture is typically defined as a system ofshared meaning. Values--often tacit or even unconscious--define organizational culture at a deep,possibly unconscious level. Culture is expressed symbolically through rituals, stories, and myths,and is reinforced by many aspects of organizational structure and functioning.Authors who write primarily for a practitioner audience have argued that a "strong" or"appropriate" organizational culture leads to improved organizational performance. They alsohave claimed that proactive management can help create the right kind of culture.The academic community has been more skeptical. A recent review of the literature foundlimited support for a link between organizational culture and performance in the little research thatis available, and cast doubt on whether it is even possible to demonstrate a convincing linkage. Anumber of scholars believe that a strong organizational culture is deeply rooted in employees'views of reality, as well as a wide range of organizational practices, and is thus highly resistant to3

change. Some contend that an organization's culture can be traced to the beliefs of its founders,and thus resembles a "genetic code" that is very difficult to rearrange. Others argue that all sizableorganizations have multiple cultures, not just one, thus vastly increasing the difficulty of managingculture.Nevertheless, academic doubts have not dampened the enthusiasm of practitioners forattempts to manage organizational culture. A characteristic early step in managing culture is thecreation of a high-level task team charged with codifying the firm's values in a formal statement.The logic is straightforward. If organizational values are basic to organizational culture, then theorganization's values need to be understood and actively shaped if necessary. Although manyobservers (even Peters and Waterman) are skeptical of formal written statements of organizationalvalues, as opposed to the expression of values through myths, stories, and executive behavior,formalizing values in an official philosophy statement comes naturally to formal organizations. Sotoo does rolling out the statement throughout the organization with a fair amount of hoopla. Aconsulting mini-industry has arisen to support all of this activity, with the typical charge running$50,000 to $100,000 to develop a philosophy and associated communications strategy. As aresult, the corporate philosophy statement has become almost as commonplace in modern firms asthe employee handbook and the company newsletter.Why Create a Corporate Philosophy?One would hope that all of this executive and employee attention and resources tocorporate philosophies have generated some benefit to organizations, employees, andshareholders. However, we see no reason to believe that this happens very often. In ourexperience, the typical corporate philosophy statement has, at best, a negligible impact on theattitudes, beliefs, and behavior of organizational members. If employees are even aware of thephilosophy statement, they tend to regard it with indifference or cynicism. Managers do not use it.Executives forget that it exists when it is convenient to do so.4

This assessment is widely shared by those concerned with organizational values. JamesCollins and Jerry Porras, who have conducted the most in-depth research that is currentlyavailable on the corporate philosophies, found in their study:"[M]ost mission statements are terribly ineffective as a compelling, building force.In fact, most corporate statements we've encountered--be they called mission,vision, purpose, philosophy, credo, or the company way--are of little value. Theydon't have the intended effect. They don't grab people in the gut and motivate themto work toward a common end. They don't focus attention. They don't galvanizepeople to put forth their best efforts toward a compelling goal. They don't meansomething to people all up and down the organization. In fact, they are usuallynothing more than a boring stream of words."Lee Ginsburg and Neil Miller, who have conducted research and consulted on organizationalvalues, conclude:". . . for many firms, corporate values, if addressed at all, were only cited inadvertisements, press releases, and company newsletters. Are corporate valuestaken seriously or not? Our findings indicated that they are not. Our interviews andsurveys have repeatedly shown that statements and beliefs of CEOs are not beingadhered to--the 'stated values' are not a part of the daily life of the organization."Russell Ackoff, a noted observer of management practice, has further observed:"Most corporate mission statements are worthless. They consist largely of piousplatitudes such as: 'We will hold ourselves to the highest standards ofprofessionalism and ethical behavior.' They often formulate necessities asobjectives; for example, 'to achieve sufficient profit.' This is like a person sayinghis mission is to breathe sufficiently."These comments raise troubling questions. If philosophy statements do not make adifference, why do so many companies go to the trouble of developing them? Even if corporatephilosophies do not make a difference in most cases, what are the potential advantages ofdeveloping a corporate philosophy? Is it possible to develop and implement a corporatephilosophy in such a way that it increases the frequency with which managers and employees liveup to the ideals it embodies? We turn next to one of these questions.Potential Advantages of A Corporate PhilosophyAlthough the corporate philosophy statement has become extremely popular, the merits ofdeveloping such a statement have not received careful scrutiny. There have been scores of articles5

about philosophy statements, but there has been very little research on the topic. This makes anyconclusions speculative. Three broad purposes of corporate philosophy statements appear in theliterature. These include guiding behavior and decision making; offering meaning to employeesthrough the expression or enhancement of organizational culture; and inspiring commitment to theorganization, leading to higher performance.A corporate philosophy statement can be used to guide behavior and decisions. Values,which a philosophy statement expresses, by their nature define what courses of action andoutcomes "should be." Thus, the philosophy statement can help direct employee attention in somedirections and not others. Johnson & Johnson provides a frequently cited example of the use of acorporate philosophy statement in decision making. Based partly on a review if its CorporateCredo, the company responded to the infamous poisonings of Extra Strength Tylenol bywithdrawing the product from stores throughout the country, not just in the region where thepoisonings occurred. Ouchi provides examples of specific employees who made use of theircompany's written philosophy in deciding what action to take. For example, a marketing managerused the philosophy to help set a fair pricing strategy for a new product. At Levi Strauss,managers have used the firm's Aspirations Statement to help make decisions about work designand the use of information technology that links the company and suppliers. It has also ledmanagement to avoid promises of secure employment that might later have to be broken.Many people are skeptical about whether something so broad as a corporate philosophycould serve as a real guide to behavior and decision making. This skepticism is justified if weexpect the philosophy to play too specific a role. The values of a philosophy tend to be generalrather than specific. Indeed, an extremely detailed statement of values would not be any morememorable or emotionally compelling than a book of standard operating procedures.Nevertheless, a philosophy can offer broad guidance.A second potential advantage of a corporate philosophy is in expressing organizationalculture, thus helping employees to interpret ambiguous stimuli in ways that make sense. Ambiguityis everywhere in organizations. There often are no obvious answers to such basic questions as, is6

my unit performing well? Am I paid fairly for my contribution to the organization? Are differentemployee groups in the organization treated fairly by management? Is the company pursuing theright strategy? Research on organizational culture has consistently emphasized that culture helpsemployees interpret their social reality in ways that permit them to answer such questions. Sensemaking is perhaps the most important attribute of organizational cultures. Organizational cultureshelp employees to arrive at shared goals and expectations, to understand how their individualroles fit within a larger picture, to maintain norms of acceptable conduct, and to derive consistentinterpretations of the acts of managers, peers, and customers.We should not expect that a corporate philosophy is powerful enough, by itself, to fullyexpress an organizational culture or to replace other expressions of the culture. However, aphilosophy statement can offer one clear, compelling statement of the corporate vision. It tellsemployees and prospective employees what the organization stands for, and it can help set anemotional tone for the culture. This use of philosophy statements is consistent with the purposes ofphilosophies found in a survey of large British firms.It is interesting that corporate philosophy statements manifest not only organizationalculture, but national cultures as well. This is one reason for considerable overlap in the content ofthe philosophies of different companies from the same society. A recent study indicates thatEuropean, American, and Japanese companies tend to produce different types of philosophystatements that reflect national cultures. Western philosophy statements, for example, tend to bemuch more explicit and informative and tend to emphasize the role of the corporation in relation toexternal stakeholders, such as customers and the general public. Japanese philosophy statementstend to be internally focused and more emotional in tone, and tend to emphasize internalcooperation and harmony.Even a relatively specific statement of corporate philosophy can evolve in meaning as theorganization changes over time and as the national culture evolves. Consultant and author MichaelMaccoby once compared a value statement that he helped develop to the Declaration ofIndependence. This is an intriguing comparison. For example, the Declaration's famous statement7

that "all men are created equal" captured the ideal of a society that, at the time, allowed onlywhite, male property holders to vote. Each generation has redefined equality, and struggles overits meaning have been fierce and sometimes bloody. The phrase haunted the conscience of thenation as the franchise was extended first to those who did not own property, then to former slaves,and finally to women. Contemporary extensions of the concept of equality and equal protection gowell beyond the vision of the nation's Founding Fathers, as some form of equal protection has beenextended to such groups such as children, illegal aliens, and the disabled. Similarly,interpretations of the values expressed in a corporate philosophy statement can be expected toevolve over time.A third potential advantage of a philosophy statement is that it may contribute toorganizational performance by inspiring employee motivation or feelings of commitment to theorganization. If the lofty ideals expressed in the philosophy statement resonate with the privatevalues of employees, then employees may be more willing to view the meeting of organizationalends as consistent with their own desires. Thus, Collins and Porras argue that the statement should"be able to grab the 'soul' of each organizational member". The philosophy statement can bevisionary. That is, it can express what the organization wishes to be rather than what it presentlyis. Ackoff indicates that "A mission should play the same role in a company that the Holy Graildid in the Crusades. It does not have to appear feasible: it only has to appear desirable." Thephilosophy statement does not necessarily have to move mountains to make a cumulative differencein corporate performance. If individual employees become just a little more dedicated to servingtheir customers, exert just a bit more effort to meeting important performance goals, and care just alittle more about their work, the statement may offer a positive return on the investment needed toproduce it. Some authorities claim that high performance, high commitment work systems derivein part from clear values, and that a philosophy statement is a key step in designing such systems.Perhaps the most eloquent executive on the subject of corporate philosophies is RobertHaas, Chairman and CEO of Levi Strauss. In a Harvard Business Review interview, he said:8

What we've learned is that the soft stuff and the hard stuff are becomingincreasingly intertwined. A company's values--what it stands for, what its peoplebelieve in--are crucial to its competitive success. Indeed, values drive thebusiness. . . In a more volatile and dynamic business environment, the controls haveto be more conceptual. They can't be human any more: Bob Haas telling peoplewhat to do. It's the ideas of a business that are controlling, not some manager withauthority.It is interesting in this regard that one study found that the firms that specified a philosophyin the corporate mission statement were more profitable than those that did not. Results such asthese need to be interpreted cautiously, because there are many possible causes of such anassociation. For example, more profitable firms have available to them more resources fordeveloping polished philosophy statements. Nevertheless, the results are provocative, andconsistent with the arguments made by proponents of philosophy statements.Is There a Downside to a Corporate Philosophy?With such advantages to adopting a corporate philosophy, should every company have one?We believe that a philosophy may not be a positive or even a neutral force in all cases. A poorlyenacted philosophy is likely to breed cynicism or apathy. The more beautiful the prose and themore desirable the vision, the more apparent will be any discrepancy between the dream andreality. As a result, a philosophy statement by itself is not likely to have any positive effect, andmay even demoralize employees rather than inspire them if they see it as empty words. Inaddition, a philosophy that becomes too rigid may become a justification for failing to grapplewith new corporate challenges. This is the obverse side of the culture coin. A strong culture,fostered in part by a compelling organizational philosophy, may channel perceptions in ways thatencourage common understanding--or may make employees blind to changing realities. It isinteresting that IBM, a company that has performed poorly because it failed to adapt to a changingenvironment, once was frequently and favorably cited as a company with a strong corporatephilosophy. Its philosophy, penned by founder Thomas Watson Sr., became a justification forstagnation in recent years. Its emphasis on the individual encouraged IBM to ignore theimportance of teams to a high technology firm, and the emphasis on "excellence" in everythingbecame an excuse for bureaucratic excess at every turn.9

Means of Realizing a Corporate PhilosophyClearly, not every corporation that adopts a formal philosophy realizes benefits. But if weassume that it is possible to gain value in the expression and use of a corporate philosophy, we areleft with another important question. How is it possible to make the corporate philosophy real--that is, something more than a set of empty platitudes? How is it possible to develop the "right"philosophy--that is, one that reflects the values, business strategy, core competencies, andpractices the firm needs to succeed? There are a number of possible answers, which aresummarized in Figure 2.First, the wording of the statement may affect how it is used and whether employees andmanagers take it seriously. Most writing on the topic of corporate philosophies has focused on thisissue. Some of the resulting advice is useful. We find it hard to argue with the commonplace callfor compelling, vivid prose. Returning to our example of the Declaration of Independence, thestatement that "We hold these truths to be self-evident, that all men are created equal . . ." is simplymore powerful and memorable than "we believe in fairness." In addition, if no one can disagreewith the statement, it probably is too bland to be of value. If the statement is too long and complex,it will not be remembered. Stan Davis argues for a statement that includes no more than fourguiding beliefs. He makes the arresting argument that the Ten Commandments are better knownthan any corporate values, yet few people can recite many of them.Although the statement itself probably matters, we believe that most observersoverestimate the importance of the prose. Few employees or managers make a hobby of literarycriticism. They are unlikely to scrutinize the text. More important, there are more importantfactors governing their behavior other than the specific words in a philosophy statement.A second means of realizing a philosophy is use of an effective process for thedevelopment and communication of the philosophy throughout the company. Companies aredevoting extensive attention to this step. Much has been written about it. As a result,communication plans are becoming increasingly sophisticated. Media used to communicate thephilosophy statement range from professional videos to small group discussion meetings to wallet-10

sized cards emblazoned with the statement. It is common to assign this step to a special crossleveltask force, possibly with the assistance of a consulting firm that specializes in corporatephilosophies. Such groups are useful for collecting a variety of perspectives on corporate valuesand for developing ideas about communication strategies. However, it may be that inoffensive andunexciting philosophy statements are one outgrowth of the use of such task forces. It is interestingto note here that company founders (such as IBM's Watson) rather than quasi-participative taskteams penned many of the best-known and most memorable corporate philosophies.The development process may help determine how seriously the philosophy statement isviewed in the organization. A good development process may raise employee awareness of thephilosophy and may increase feelings of ownership for it. However, we see development andcommunication processes as important but insufficient for the realization of a corporatephilosophy. The key problems rarely lie in employee understanding and agreement with thephilosophy. Rather, the key problems lie in aligning behavior, policies and practices with the finesentiments expressed in the philosophy. If a public relations campaign heightens employeeawareness of the gap between corporate rhetoric and reality, it may actually weaken the impact ofthe philosophy. Thus, the benefits of a good development and communication process may beshort term only unless the organization itself changes in ways that are consistent with thephilosophy.This suggests a third means of realizing a corporate philosophy: wed it to every majorhuman resource system that governs the behavior of organizational members. This weavesphilosophical principles into the fabric of daily organizational life. It requires translating generalvalue statements into specific policies. In our view, this is the most important strategy forrealizing a corporate philosophy.Some examples illustrate how companies realize values through a focus on systems.Reward systems are probably the most powerful means of influencing the realization of aphilosophy. Over the long term, employees tend to do what they are rewarded for doing and stopdoing what they are not rewarded for doing. For example, 3M and Rubbermaid place a high value11

on innovation and are among the most innovative organizations in the U.S. This is expressed in areward system that requires managers to meet high targets for the percentage of their sales that arederived from products introduced within the last five years. Similarly, firms that place a value onentrepreneurial behavior need to place pay at risk and provide high rewards for successful risktaking.Conversely, organizations that value stability and long-term effort (such as universities andR&D labs) tend to offer more job security than most.Performance appraisal also can be based on behaviors that are relevant to the corporatephilosophy. AlliedSignal, for example, currently assesses the performance of every manager onbehaviors that are associated with a statement of corporate values. Levi Strauss bases one-third ofthe performance appraisal rating on behavior that is consistent with the corporate "AspirationsStatement." Performance appraisals also can be used to recognize more specific elements of acorporate philosophy or value statement. General Mills values community involvement, andvolunteer activities are explicitly recognized in performance appraisals. Ultimately, careersuccess must be based on corporate values if those values are to be taken seriously.Training practices also need to reflect the philosophy. Training about the philosophy itselfand how it relates to the behavior of employees may be needed. The overall amount of trainingprovided by the firm and whether the firm rewards employee development provide important cuesabout how seriously employees should take value statements about the development of employeesskills and abilities. This is especially true of firms that have a philosophy espousing a value onemployee development. For example, the Sun Company's lofty statement that "We believe humandevelopment to be the worthiest of goals of civilization . . ." commits the company to a highinvestment in training and development.Special training may need to be provided to managers to help them learn about thephilosophy and how to manage in a way that is consistent with it. The Minneapolis Star Tribune isattempting to become a "principles-driven, not a policy-driven, business." The newspaper hasdeveloped an innovative management training effort called "More Power to Us." It is intended toshow managers how relying on core values will help the paper realize its strategy, and in turn to12

meet its purpose. Its purpose is "to enrich the shared life of the community by being the area'sleading provider of information that people value." The document and training help managersunderstand how the paper's restructuring into work teams that have substantial decision makingpower has increased performance. They also help managers understand the implications of thesechanges for their own roles and behavior.The hiring process also can reflect the philosophy. The nature of the process should reflectany values concerning openness, trust, and fairness. Whether employees are given a realisticpicture of the plusses and minuses of the job and working for the organization will govern earlyemployee impressions of whether the organization trusts them and is trustworthy. An explicit rolecan be given to the corporate philosophy as well. Johnson & Johnson tells all job applicants aboutits Credo, and all new employees receive a copy and an explanation of the document. Thisappears to be a common practice among Japanese companies. The philosophy can also be used todetermine what traits should be sought in potential employees. Southwest Airlines believes "workshould be fun . . . it can be play . . . enjoy it." As a result, the company attempts to hire employeeswho have a sense of humor--as Southwest passengers long ago discovered.The corporate philosophy should be reflected in other systems as well. Examples includethe design of work (for example, the role given to teams reflects values around teamwork),organization structure (for example, the number of management layers reflects values aroundemployee empowerment), and labor relations (for example, the corporate stance toward unionsreflects various values).A final means of realizing a corporate philosophy is a process of ongoing affirmation andrenewal of the philosophy. All of the other means can be used, and yet not be enough. Thestatement may be well written, the philosophy may be communicated well, and variousorganizational systems may reinforce it. Yet, a process is still needed to continually nuture interestin and use of the philosophy. In some explicit way, the firm actively engage employees in anexplicit reconsideration of the meaning of the philosophy and whether it is being lived in the firm.This approach has received virtually no attention in the prior literature. One company's attempt to13

use this approach will be the focus of the remainder of this paper. We will discuss an innovativeplant visit process used by the Eaton Corporation for affirmation and renewal of its philosophy.The Eaton Corporation Philosophy Plant Visit ProcessEaton Corporation is a Cleveland-based manufacturer of motor vehicle components (suchas valves, brakes, and axles) and controls for appliances, vehicles, and industrial equipment. Withover $4.4 billion in sales, the company ranked as the 115st largest firm in the 1994 Fortune 500listings. After recent acquisitions, it now has 50,000 employees and 146 manufacturing plants.Eaton is a global firm, with over 50 plants in Europe, Asia, Australia, and Latin America. Despiteits size, the company is largely unknown to the general public because it sells few products for themass market. However, the company is well known to investors and others in the businesscommunity due to its long track record of growth and profitability. For example, Eaton ranked128th among Fortune 500 firms in total return to investors during the previous year. For a numberof years, Eaton has ranked first, second, or third among motor vehicle industry firms in Fortune'sannual rankings of most admired companies.Origins of The Eaton PhilosophyThe Eaton Philosophy: Excellence Through People arose from the company's experienceswith innovative employee relations efforts. The beginning was in the valve business in 1969. Atthe time, Eaton built valves at a large plant in Battle Creek, Michigan that had a history ofcontentious union-management relations. Eaton had the opportunity to obtain new valve businessfrom Ford if it would build a second plant, insuring a stable supply of valves. Eaton built a"greenfield" plant in Kearney, Nebraska.The Kearney plant was designated as a "new philosophy" plant. This meant that the plantwas managed in a way that increased mutual respect and trust between factory and managementemployees. Status differences between management and non-management were minimal; therewere no time clocks, buzzers, or whistles. Management encouraged employees to contribute ideasfor improvement. The company paid for casual absences of all employees, yet the absenteeismrate was only 1%. By current standards, the human resource practices of the plant were not14

evolutionary. The plant did not use self-managed work teams, skill based pay, gainsharing, orother innovations that are common today in new high involvement plants. Nevertheless, thechanges were radical in Eaton, and the differences in employee morale and plant performancebetween the Battle Creek and Kearney plants were stunning. The Kearney plant achieved 25 to 30percent greater productivity using the same production technology. Human resource practices atthe plant have continued to evolve, and the plant remains to this day one of the most efficient in itsindustry. Eaton managers recognized and appreciated the success at Kearney. As Eaton grew andbuilt new plants, every new plant was built on the Kearney "new philosophy" model.The early 1980s brought hard economic times and fierce domestic and internationalcompetition to Eaton's core businesses. Eaton, like other companies, began looking for everypossible source of competitive advantage as it faced a tougher and more uncertain environment. In1983, as the national economy began to emerge from recession, Eaton's then-CEO E. M. de Windtasked the human resource function to review the new philosophy plants. The Director of IndustrialRelations, who subsequently led or organized all major corporate initiatives related to the EatonPhilosophy, led the review team. The purpose of the review was to learn whether the plants'management style survived during the recession and how that management style was related toperformance. The investigators concluded that although some new plants had struggled, on theywhole they had continued to maintain their innovative management style. The level of employeeinvolvement, communication, and reward innovation had deepened over the years in most of theplants. Most important, those plants that maintained their innovative management style showedbetter operating performance than those that did not.The Human Resources group presented their report and suggested a course of action to Mr.de Windt. They proposed capturing the central themes in the new philosophy plants and diffusingthe new management philosophy throughout the company. The executive group took these findingsseriously, and the Chief Executive Officer resolved to spread the new philosophy throughoutEaton. In 1984, senior management commissioned a task force that included representatives of thecorporate headquarters, each of the four main business groups, and international operations. The15

task force was charged with drafting the "Eaton Philosophy: Excellence through People," whichwould capture the best principles of the new plants and articulate them in a formal statement.Figure 3 displays the philosophy statement. The philosophy was introduced to virtually every U.S.employee of Eaton in 1985, and to employees of international operations in succeeding years.Selected management representatives received two and a half days of training and orientation,which equipped them to perform management orientations in their own organizations. Allemployees participated in meetings that included a videotape about the philosophy, and allreceived a brochure detailing the philosophy. To assess the company's progress toward practicingthe philosophy, the human resource function commissioned a survey of Eaton employees thatprovided data about topics relevant to the philosophy.Until this point, the process by which the Eaton Philosophy was developed and rolled outresembled that used by many American firms. Most U.S. companies would be comfortable withthe Eaton philosophy statement. While Eaton was an early adopter, it was not the first to developa corporate philosophy. The main difference between the Eaton Philosophy and the statements ofmany other firms was its direct origins in the internal experiences of the company. The financialsuccess of the "new philosophy" plants was critical. The company's experience showed that newways of managing people contributed to business performance. The Eaton philosophy was notadopted because corporate philosophies were in fashion, and it was not the product of a consultingor public relations firm.Eaton Philosophy Plant Visit ProcessIn 1988, Eaton made a significant departure from conventional practice. The companyadopted an innovative process for monitoring the implementation of the philosophy throughout thefirm. This process, termed the Eaton Philosophy Plant Visit Process, now has been used withgreat success for six years. The process is interesting in part because it engages employees at alllevels in an active inquiry into progress in realizing the Eaton Philosophy. The process hasinvolved scores of visits to Eaton plants in the U.S. and foreign countries, and has directly16

involved thousands of employees. The remainder of this article will explore the nature of thisprocess and how it has evolved over time.The company's senior executive group was concerned that the Eaton philosophy mightbecome a one-time event, not a way of life. They charged the human resource function withdeveloping some means of making the realization of the philosophy an ongoing process. Theinitial design called for corporate teams to visit a set of plants to examine use of the philosophy.This was done in 1988, but the process proved unsatisfying. The principles of the philosophy, bytheir nature, were difficult for employees at any level to disagree with, and questions about thephilosophy and its use tended to produce "motherhood and apple pie" statements. With consultinghelp from the Center for Effective Organizations of the University of Southern California, theDirector of Industrial Relations devised a new approach for 1989. The same approach has beenused each year since then, and it is a ritual that is becoming rooted in the culture of the company.The Annual Plant Visit CycleThe cycle of activity begins early in the year with the identification of visit sites and visitteam members. In 1993, for example, 30 team members visited 18 plants, or about one-fifth of theEaton plants then located in North America. Executives of the company's major business groupsand the corporate Human Resources staff nominate most of the visit sites, although in some casesplant managers request that their location be included. Visit team members come from every levelof management, every function, and every geographic area. They represent relatively young, highpotential managers and some more senior executives who hold critical positions.The extensive use of high potential managers is a key to the success of the process. Theuse of high potential managers in the visit teams demonstrates in a tangible way the seriousnesswith which senior executives view the Eaton Philosophy and the visit process. More subtly,inclusion in the visit teams offers public confirmation that the manager is considered to have highpotential, so members of the visit teams tend see their assignment more as a reward than a burden.Over 150 managers have been included in the visit teams so far. Participation in the program isbecoming an accepted rite of passage for managers on the way up the corporate ladder. Visit team17

members have included some who are now among the most senior executives in the corporation,and it is likely that one day the Chairman of the company will have been a visit team member. Thevisit process serves as an excellent management development tool. Managers develop importantcontacts and friendships through their involvement in the visit teams. Since they only visit sitesthat are in business groups other than their own, team members gain broader first-hand exposure tothe company. They usually find ideas for changes that they can take back to their home plant.Finally, the activity serves as an opportunity for team members to reflect on the values of thecompany and how the values are expressed in daily practice.Early in the year, human resource managers lead two days of training for visit teammembers. A top executive of the company (Vice President or above) typically stops in to expresssupport for the process and compliment the attendees for their selection to the visit teams. Thehuman resource managers summarize the history of the Eaton Philosophy and the plant visitprocess, and describe the role of visit team members. Most of the session is devoted to training inactive listening and conducting effective interviews. The training helps them identify theirstrengths and weaknesses as interviewers, and avoid possible pitfalls of the visit team process.Plant visits are scheduled throughout the year. The visit team for any given plant typicallyincludes four members from the interviewer pool and two corporate human resource managersexperienced in the visit process. The visit process begins with a dinner hosted by the local topmanagement group. This social event tends to reduce the threat that local managers mightotherwise feel from having outsiders conduct confidential interviews with their employees. Thenext day is spent receiving a brief tour of the site and conducting interviews. The visit teamdivides into two subgroups, each of which conducts a series of group interviews. Employees arerandomly selected from the plant population and asked to participate. The visit team interviewsthe top management team and small groups of randomly chosen factory employees, supervisors,and office employees. Employees are interviewed on all shifts. Different hierarchical levels arenot mixed in the interview groups. Interviewees are assured of confidentiality. The visit teaminterviews a total of about 70 employees and managers.18

The interview questions do not ask employees for their opinion of the Eaton Philosophy,and do not ask directly for a rating of how well the plant is doing on specific provisions of thephilosophy. Rather, the questions ask employees to describe real situations within the plant thatmight represent illustrations of each of the eight principles of the philosophy in action. Forexample, rather than asking how much employees are involved in decision making, they might beasked to describe the last manufacturing process change. The visit team infers the level ofemployee involvement in organizational changes from the discussion.On the final day, the entire visit team organizes a presentation, spending a half-daysummarizing what they have heard and discussing their findings with the plant management team.The session captures the diversity of experiences the team has heard about, and indicates issuesthat were especially salient. The feedback is intended to be fair but not sugar-coated. Thefeedback sometimes surprises or unnerves the plant manager or top management team, and onoccasion the feedback session is an emotionally wrenching experience. In one plant, for example,there was a stark difference in the climate of two parts of the plant, which employees called"America" and "Russia." This was a traumatic discovery for the top management team, which hadgreatly underestimated the differences in management style between the two areas. Throughout thefeedback process, the visit team avoids action recommendations. The focus is on understandingand problem discovery. This forces local management to assume responsibility for a finalinterpretation of the feedback data and for making any changes, and avoids asking the visit team todo more than is realistic in a short visit. The visit team follows up with a written report to plantmanagement that summarizes their findings.The plant management team is required to provide feedback to employees about theinterview results, and is asked to determine whether any problem areas require further attention.However, no one follows up to insure that local management develops or carries out action plans.Confidentiality of feedback from those above the plant level is absolute. Thus, action depends onlocal management initiative. This is a striking departure from standard procedure in Eaton.19

After the visit team completes the entire round of plant visits, a wrap-up meeting is held forall the visit team members and a representative of each visited plant. In the spirit of continuousimprovement, the session reviews highlights, shortcomings, accomplishments, and problemsexperienced during the plant visits. The group then fashions a set of conclusions about the statusof the Eaton Philosophy and issues that senior executives may need to address to further realize thephilosophy in daily life. The corporate human resource department then captures these findings ina formal report to the senior executive team. This is the only reporting that is made to higher-levelmanagement, and it maintains confidentiality for specific sites. The year-end meeting is the onlyformal follow-up to discuss the impact of the plant visit process. Plants are revisited after a fewyears, which affords the visit team a general perspective on whether the plant has made changesover the years. However, there obviously is no tight top-down control over whether the plantstake the process seriously. It remains the responsibility of the plant management team to act on thevisit team's findings.One very clear finding from the wrap-up meetings is that the self-help approach toaddressing problems related to the Eaton Philosophy does in fact lead to change at the plant level.On average, the visited plants adopt two to three significant changes as a result of the visitprocess. Typical changes include new training programs, new mechanisms for communicatingbusiness information, and enhancements to employee involvement efforts. One of the mostdramatic changes was at an Eaton location in a deteriorating urban neighborhood. The most salientissue in the minds of employees was personal safety, an issue that came up repeatedly in theinterviews even though there was no question that specifically addressed this topic. A number ofcrimes had taken place in the parking lot and near the facility. Local management had notunderstood the depth of employee fear about crime before the interview feedback. As a directresult of the feedback, management formed employee task forces and committes to define the issuesand develop action plans. This led to a number of steps that included revamping its securitysystems, improving parking lot security, and creating a hot line to respond to rumors and provideinformation about crimes. Management also worked with the local community, establishing a20

neighborhood block watch program that equipped members with two-way radios that permittedthem to contact Eaton security personnel, who could immediately contact police. Crime in theneighborhood dropped significantly, and block watch members even helped close four drughouses.Visit Processes in Corporate SubunitsOne sign of the vitality of the visit process is that several different Eaton subunits haveadopted their own version of the process. Eaton's European plants participate in a visit processunder the direction of the European Human Resource Director. Because Eaton has plants inseveral European countries, this process has the additional complexities associated with managingall activities in the cycle in several different languages. In other respects, however, the Europeanprocess is a clone of the North American process. Three North American Operations, which inEaton are units that include two or more Divisions, also have created their own processes. Theseare Truck Components Operations--North America (TCONA), Automotive and ApplianceControls Operations (AACO), and Engine Components Operations (ECO). Managers considerthese additional visit processes to be very successful, and all will be continuing in the future.AACO, which includes 16 plants located in several countries, began a visit process inNorth American locations in 1992. This process began largely at the instigation of a senior linemanager, who had been part of the corporate-wide visit process and found it valuable. The ECOprocess began in 1993. It was initiated by the Operations Manager, who also had been inspired byhis participation in the corporate process. Both the AACO and ECO plant processes mirror thecorporate process in purposes and activities. Managers in these operations began their ownprocesses to insure that their plants were visited more frequently than would be possible with thecorporate process alone. Every plant in an operation can be visited every year or two in anOperations-level process. This also increases the frequency with which revisits occur in allplants in the company. Prior to the development of the operations processes, each plant could berevisited only once every five to six years in a corporate-wide process. Coordinating the21

corporate and operations processes makes it possible for each plant in the company to be visitedby a visit team every three to four years.Key managers in these operations view practices that are consistent with the EatonPhilosophy as critical to business success, and thus want a process that more closely monitors useof philosophy-related practices within the unit. The AACO and ECO processes explicitlyemphasize management development as a goal, whereas managers realized the managementdevelopment benefits of the corporate process after the visit process had begun. Furthermore,confidentiality has a different meaning in Operations-level processes. The visit teams are made upof peers of the plant manager and others who may be intimately familiar with the productiontechnology and business issues facing the plant. Individual interviews remain confidential, but theplant automatically surrenders anonymity at least to some degree in these processes. On the otherhand, plant managers feel more urgency to take action on problems that are identified in the visitprocess. They know that their peers will return within a year or two, and any failure to addressold problems will be obvious. Finally, the process makes it easier for Operations managers toidentify key problem areas that face multiple locations within the Operation.The TCONA process, begun in 1991, also evolved from the positive experience of a keyline manager with the corporate site visit process. However, this is the subunit visit process thatis most different from the original corporate site visit process. The visit team is a set of tenmanagers who have key roles in the Operation, including plant managers, key line managers, andTCONA human resource managers. A key goal of the TCONA process is to give employees anongoing, direct channel for communicating their concerns to managers above the plant level.Another goal is problem solving, not just problem finding as in the corporate visit process. Themembers of the visit team become very familiar with each plant as a result of the visit process, andmembers of the team have the authority to solve problems on the spot and expect to do so. Thus,individuals are offered confidentiality, but site confidentiality is not a part of this process. Thisprocess is more threatening to plant managers than the corporate process, especially if the visitteam uncovers many problems. The process is similar to the corporate process in that small22

groups of employees receive a structured interview conducted by visit team members, feedback isprovided to the management team, and local management has the primary responsibility for furtherinvestigating and solving problems. However, the interviews cover two to three times as manyemployees as the corporate process.An internal study of the TCONA process by the Corporate Human Resource PracticesManager found that the management participants were enthusiastic about the process and wanted itto continue. They believed that the process was an important communication channel betweenemployees and management, and that employees were very candid in the interviews. They sawbenefits for the plant receiving feedback, but also for the management visit team as a group and forthe plants they represented. They viewed the process as doing "more to bring them closer togetherthan anything else they have ever done." A number of changes appeared to be taking place becauseof the process. For example, the Operation as a whole was moving faster to implement employeeinvolvement activities and was addressing problems between the plants and central supportservices such as engineering.ConclusionThe Eaton Philosophy expresses the ideals of the company. Like any expression of ideals,it does not describe current reality but rather a desired future state. The journey toward realizingthe Eaton Philosophy, however, has support at every level of the organization. The EatonPhilosophy appears to describe the "right thing" to do in the minds of employees and managersalike. Managers at all levels have repeatedly told us that they believe the philosophy is a key tobusiness success. In their mind, there is no conflict between "doing right" and "doing well." BillButler, the Chairman of Eaton, expressed this sentiment in a 1992 speech:"We believe that Eaton can continue to be a very competitive company because ofthe management style we are pursuing. Most companies--Eaton included--have foryears proclaimed the importance of committed employees to success. In the EatonPhilosophy, and through the process of site visits, we are managing to insure thatemployees will make the needed contribution to our success."23

There is no doubt that support from the very top has been critical to the acceptance of thephilosophy by managers and employees alike. Perhaps equally important, however, is the plantvisit process.The key lesson from the Eaton case is that some process for the ongoing affirmation andrenewal of the corporate philosophy is critical to its vitality. Such a process provides an ongoingmeans of reflection on the meaning of the philosophy and its degree of penetration into the dailylives of employees and managers. Whereas the corporate philosophy has come and been forgottenin many companies, it appears to be alive and well at Eaton.24

ACKNOWLEDGEMENTSMany people played important roles in the development of the Eaton Philosophy.Operations Human Resource Managers John F. Sulentich and Charles O. Thompson also activelyparticipated in the plant visit process. We acknowledge the active participation of more than 100Eaton operations and staff managers who have been visit team members. John D. Evans, VicePresident - Human Resources, provided continuing support for the effort. The Eaton Philosophyand visit process would not have begun or succeeded without the support of former Eaton ChiefExecutive Officers E. M. de Windt and James R. Stover and current CEO William E. Butler.Finally, Ed Lawler of the Center for Effective Organizations, University of Southern Californiaprovided initial consulting assistance on the plant visit process as well as helpful comments on anearlier draft of this paper.25

Gerald E. Ledford, Jr. is Senior Research Scientist at the Center for EffectiveOrganizations, School of Business Administration, the University of Southern California. Hereceived his B.A. in Psychology from the George Washington University and his M.A. and Ph.D. inPsychology from the University of Michigan.He consulted on the development of the Eaton Philosophy plant visit process. He hasconducted research, published, and consulted on a wide variety of approaches to improvingorganizational effectiveness and employee well-being, including employee involvement,innovative reward systems, organization design, job design, and union-management cooperation.He has published 40 articles and book chapters and is co-author of four books, includingEmployee Involvement and Total Quality Management: Practices and Results in Fortune 1000Companies (1992) and Large-Scale Organizational Change (1989). He is an active member of theAmerican Psychological Association, the Academy of Management, and American CompensationAssociation.26

Jon R. Wendenhof is Corporate Director of Industrial Relations for Eaton Corporation.He received a B.S. in Sociology from Michigan State University. He is a 30-year Eaton employee,and has held a variety of operations and staff Human Resources assignments during his career. Hiswork in the early 1980’s led to the development of the Eaton Philosophy. Among his currentresponsibilities is the development and oversight of programs and processes that support thecorporation’s continuing pursuit of the ideals of the Eaton Philosophy.27

James T. Strahley is Vice President of Human Resources, Simpson Industries, Inc. Heearned his Bachelors in Industrial Administration from the General Motors Institute and his M.S. inBusiness Administration from Central Michigan University.Prior to joining Simpson Industries in 1993, he spent 17 years at Eaton Corporation in avariety of plant, division, and corporate Human Resources assignments. He actively participatedin the development and realization of the Eaton Philosophy.Jim is a member of the Human Resources Council of the Manufacturers Alliance forProductivity & Innovation.28

Selected BibliographyPhilip Selznick considered how organizations are transformed into value-laden institutionsin Leadership in Administration, Harper & Row, 1957. Best-sellers advocating the explication ofcorporate values were Thomas J. Peters and Robert H. Waterman Jr., In Search of Excellence:Lessons from America's Best-Run Companies, Harper & Row, 1982, and William G. Ouchi,Theory Z: How American Business Can Meet the Japanese Challenge, Addison-Wesley, 1982.There has been an extensive debate over whether corporate culture can be deliberatelymanaged. Advocates of managing culture include Stanley M. Davis, Managing Corporate Culture,Ballinger, 1984 and Terrence Deal and Allen A. Kennedy, Corporate Cultures: The Rites andRituals of Corporate Life, Addison-Wesley, 1982. Skeptics include Edgar Schein, OrganizationalCulture and Leadership: A Dynamic View, Jossey-Bass, 1985; Caren Siehl and Joanne Martin,"Organizational Culture: A Key to Financial Performance?", in Benjamin Schneider (Ed).,Organizational Climate and Culture, Jossey-Bass, 1990; and Meryl Reis Louis, "An Investigator'sGuide to Workplace Culture," in P.J. Frost, L.F. Moore, M.R. Louis, C.C. Lundberg, and J. Martin,Organizational Culture, Sage, 1985. The example of Southwest Airlines was provided by JamesC. Quick, "Crafting an Organizational Culture: Herb's Hand at Southwest Airlines,"Organizational Dynamics, 1992, 21(2), 45-56.The prevalence of formal corporate philosophies and similar statements has beendocumented by John A. Pearce II and Fred David, "Corporate Mission Statements: The BottomLine," Academy of Management Executive, 1987, 1, 109-116. They also present evidence of therelationship between such statements and corporate performance. Information about the consultingindustry that has developed around corporate philosophy statements is sketched by Alan Farnham,"State Your Values, Hold the Hot Air," Fortune, April 19, 1993, pp. 117-124.Quotations about the ineffectiveness of most corporate philosophy statements were takenfrom James C. Collins and Jerry I. Porras, "Organizational Vision and Visionary Organizations,"California Management Review, 1991, 34, 30-52; Lee Ginsburg and Neil Miller, "Value-Driven29

Management," Business Horizons, 1992, 35(3), 23-27; and Russell L Ackoff, "MissionStatements," Planning Review, 1987, 15(4), 30-31.The best available research on corporate philosophies has been conducted by Collins andPorras. The most impressive statement by an executive interested in this topic is found in R.Howard's interview with Levi Strauss CEO Robert Haas in the Harvard Business Review, 1990,68(5), 132-144. Others who have considered how such statements can be used to advantageinclude Ouchi (see above); R. Duane Ireland and Michael A. Hitt, "Mission Statements:Importance, Challenge, and Recommendations for Development," 1992, Business Horizons, 35(3),34-42; Mary Klemm, Stuart Sanderson, and George Luffman, "Mission Statements: SellingCorporate Values to Employees," Long Range Planning, 1991, 24(3), 73-78; John J. Sherwood,"Creating Work Cultures with Competitive Advantage," Organizational Dynamics, 1988, 16(3), 4-27; and Ron Zemke, "Stalking the Elusive Corporate Credo," Training, June 1985, pp. 41-51.Catherine Langlois has conducted research on differences between corporate philosophystatements from U.S., European, and Japanese firms (see "National Character in CorporatePhilosophies: How Different is Japan," European Managment Journal, 1993, 11, 313-320.) Karelvon Wolferen also has documented how Japanese firms use such statements in The Enigma ofJapanese Power, Vintage Books, 1989.30

FIGURE 1Potential Advantages of a Corporate PhilosophyGuiding Behavior and DecisionsExpressing Organizational CultureIncreasing Organizational Performance31

FIGURE 2Means of Realizing a Corporate Philosophy1. A compelling philosophy statement2. An effective communication and implementation process3. Strong linkages between the philosophy and systemsgoverning behavior4. A process for ongoing affirmation and renewal32

FIGURE 3The Eaton Philosophy: Excellence through People• Focus on the positive behavior of employees.• Encourage employee involvement in decisions.• Communicate with employees in a timely and candid way, with emphasison face-to-face communications.• Compensation employees competitively, under systems which rewardexcellence.• Provide training for organization/individual success.• Maintain effective performance appraisal systems.• Emphasize promotion-from-within throughout the Company.• Select managers and supervisors who demonstrate an appropriate blendof human relations skills and technical competence.33